Socioeconomic Impacts of Infrastructure Investment in Eswatini: the Case of LUSIP

University of Arkansas, Fayeteville

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8-2018

Socioeconomic Impacts of Infrastructure Investment in Eswatini: e Case of LUSIP

Noussayma Njeim

University of Arkansas, Faye t eville

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Socioeconomic Impacts of Infrastructure Investment in Eswatini: The Case of LUSIP
A thesis submitted in partial fulfillment of the requirements for the degree of
Master of Science in Agricultural Economics

by
Noussayma Njeim
American University of Beirut
Bachelor of Arts in Public Administration, 2015
American University of Beirut
Bachelor of Science in Political Science, 2015

August 2018
University of Arkansas

This thesis is approved for recommendation to the Graduate Council. _____________________________________ Lawton Lanier Nalley, Ph.D. Thesis Director

_____________________________________ _____________________________________ Jennie S. Popp, Ph.D. Committee Member
Thula Sizwe Dlamini, Ph.D. Committee Member

_____________________________________ Philipp Grundmann, Ph.D. Committee Member

Abstract

The 2016 Eswatini Vulnerability Assessment Report indicated that over half of the
Eswatini population required livelihood support due to the severe El Niño drought. Since agriculture is the backbone of Eswatini’s economy, investments in climate change mitigation are needed in order to help protect the agriculture sector and associated livelihoods from increased yield and profit variability associated with future droughts. The IPCC (Intergovernmental Panel on Climate Change) estimates climate change in Eswatini could reduce rain-fed agricultural yields by up to 50%, threating the ability of Eswatini to be food secure. As such, investing in water capture systems could help mitigate changes to both the amount and frequency of rainfall. Investments in water storage could be viewed as a type of food security insurance in the Eswatini context.

The Government of Eswatini commissioned the construction of the Lubovane Dam in
2003 to provide water, both for agricultural and household usage, as part of the Lower Usuthu Irrigation Project (LUSIP). LUSIP aimed to provide irrigation water for 11,500 ha by 2015. LUSIP was also forecasted to provide an additional 750,000-person days /year of on-farm employment mainly on sugarcane, banana, and maize fields and 36,000 days of non-farm employment/year in the new businesses and services that would have emerged after its completion in 2010. Eswatini had to allocate limited public funds for the implementation of LUSIP and without tangible evidence on the returns on investment, obtaining funding or future irrigation projects could be -difficult. As such, in 2018 the Swaziland Economic Policy Analysis and Research Centre (SEPARC) set out to estimate the benefits of LUSIP in the town of Siphofaneni using a comprehensive survey. Using the data collected by SEPARC this study set out to validate the LUSIP impact through social, economic and environmental metrics. The survey results suggest that LUSIP has provided employment opportunities, increased wages and

incomes, thus increasing the people’s ability to save. The survey also found that the increased

income and savings appeared to lead to increased food security as more people can now afford purchase their basic food needs as water is now more readily available throughout the year.

Dedication

To my beloved family, Every step and decision I took I carried my family in my thoughts. This achievement is not just mine, it has the whole family behind it, for that I am very thankful and grateful to have such an amazing support system that never left my side. I want to thank my parents for being there for

me through every step of the way and believing in me, even in times where I didn’t believe in

myself. I want to thank my brothers for supporting me throughout the years and looking out for me, teaching me how to depend on myself, and most importantly being there at any time of the day to support me.

Acknowledgments

Behind this thesis, there are many people I would like to thank and acknowledge for their help and support. I want to thank my promoter Dr. Lanier Nalley, along with all my thesis committee members for their guidance along my work and writing and their valuable comments and useful recommendations. I would also like to thank Dr. Thula Sizwe Dlamini and the SEPARC team who made my trip to the Kingdom of Eswatini memorable and were of great help during data collection. I would also like to thank Ms. Alicia Minden for always being there and helping out with all the errands.

I want to express my gratitude to all my friends, my friends at home, my IMRD friends in Europe, and the friends I made here in the University of Arkansas who were like family to me making my graduate years pass smoothly and leaving me with great memories that I will cherish for life. In addition I would like to thank my family, Aminta, Maria, Annie, Mouhammad, Lea, Rita, Layal, and Bill and Jen Maroon for their support in my trip to Swaziland.

Table of Contents

List of Figures:

List of Tables:

Literature Review The Kingdom of Eswatini

The kingdom of Eswatini (Eswatini) is a landlocked country in Southern Africa covering an area of 17,364 km^2,nearly enclosed within South Africa and sharing a portion of its northeastern border with Mozambique. Eswatini’s population is estimated at 1.1 million with a low population growth rate, for a lower middle income country of 1.08% (World Bank, 2017). The low growth rate can be attributed to the fact that Eswatini has the highest HIV/AIDS adult prevalence rate (26%) in the world (CIA, 2017). HIV in Eswatini contributes to high levels of mortality; lower life expectancy, higher infant mortality, lower population growth rates, and changes in the distribution of population by age and sex (CIA, 2017).

Food Security

Based on the 2016 Human Development Index (HDI) report, Eswatini was ranked 148^thof 188 countries listed. Although Eswatini is ranked as a lower middle-income country, income inequality is relatively high resulting in a Gini coefficient of 0.52. It is ranked according to the Gini Index as 9th in the world in terms of inequality, with 63% of Swazis living below the national poverty line, making less than 2 dollars per day (World Bank, 2017).¹In the 2017 Global Hunger Index (GHI), Eswatini ranked 71 of 119 countries resulting in the food and

nutrition situation in Eswatini being classified as “serious”, which indicates alarming, or

extremely alarming hunger levels (GHI, 2017). Recently, erratic climatic conditions have contributed to the impoverished conditions as droughts have caused over 15 years of food shortages and high variability in staple food prices (VASUDEVA, 2006). Climate, HIV and poor ¹The Gini index measures the extent to which the distribution of income among individuals or households within an economy deviates from a perfectly equal distribution

1food management programs are also to blame for decrease of agricultural production since the early 2000s and worsened after the El Niño drought in 2014/15 (VASUDEVA, 2006; SEPARC, 2018).

Health

Health issues also play a vital role in the reduction of food productivity. Eswatini currently has the highest rate of HIV/AIDS (32%) and Tuberculosis (26%) in the world (World Bank, 2017). Nearly half (47.8%) of all women are HIV positive and constitute over 80% of tuberculosis patients (CIA, 2017). Having unhealthy parents, due to malnutrition and minimal access to health care, leads to stunting of children which can cause numerous health a problems for the population such as fatigue and a weaker immune system limiting the ability to work under harsh climate conditions (World Bank, 2011). In 2017, it was reported that 31% of children and 45.6% of adults are underdeveloped in terms of BMI in Eswatini (Body Mass Index) (FAO, 2017). Health issues, such as low consumption of vitamin A, poor water sanitation and hygiene, lack of access to nutritious foods, and high HIV and Tuberculosis cases, and environmental issues, such as droughts, contribute not only to high mortality rates but slow economic growth since unhealthy workers are physically and mentally less energetic and are also more likely to be absent from work because of illness (or illness in their family) (Bloom, Canning, & Sevilla, 2011).

Economy and role of agriculture

After gaining independence in 1968 from the British Empire, the Kingdom of Eswatini experienced diversified economic growth that focused on agricultural growth in sugarcane, maize, and cotton, and pursued policies that pushed towards foreign and private investments.

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There was large economic growth (1.9%) in the industrial sector leading to Eswatini ranking 9th among the African countries in terms of GDP per capita (3051.6 USD) in 2017 (World Bank, 2017). Eswatini agriculture contributes the third highest percentage, (6.4%) to the economy after the services sector (48.6%) and manufacturing sector (45%) (World Bank, 2017). The agricultural sector is diverse with sugarcane, cotton, maize, sorghum, peanuts, tobacco, cattle, goats, sheep, pine and eucalyptus, pineapples, oranges, grapefruit, and citrus fruits as its primary crops. Given its diverse landscape, with forested and grassy highlands in the west falling to the low-lying sugar and citrus plantations in the east, Eswatini has the ability to produce a wide variety of cash crops for export (SMoA, 2016). The agriculture in Eswatini is split between largely rain-fed subsistence production by smallholder farmers, that grow rain-fed maize and vegetables representing 90% of total smallholders, and cash cropping with available irrigation on large private estates (FAO, 2018) (World Bank, 2011). The Eswatini agricultural sector is predominantly constituted by smallholder farmers, which make up 70% of the total Eswatini population; small scale producers account for 75% of the crop land but only account for 11% of total output (FA0, 2108). As such boosting productivity of small scale producers in an effort to lift them out of poverty is one of the most pressing challenges currently facing the government of Eswatini.

Drought in Eswatini

In 2015/16 the El Niño drought was the worst drought Eswatini has experienced since
1992 (SEPARC, 2018). In total nominal monetary terms, the drought cost Eswatini conservatively US $306.8 million, representing a 7.01% of Eswatini’s Gross Domestic Product (GDP) in 2016 or 18.58% of government expenditure in 2016 (SEPARC, 2018). Despite the significant drought losses in terms of agricultural production, the country has a functioning

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Disaster Risk Management (DRM) Policy (2010). However, even with extensive experience from past droughts in 2009/10, 2007, 2001, and 1992, the country is still struggling to better cope with the effects of drought with respect to economic stability, food price stability and food security. Droughts hit Eswatini particularly hard because of its reliance on surface water (mainly rivers) to provide irrigation for cash and staple crops. Due to chronic drought-like conditions in the Shiselweni and Lubombo regions households in these regions are now discouraged from participating in agriculture (ADB, 2016). Because of households’ reduced participation on agriculture, Eswatini is now heavily dependent on the international, predominately South African, market to fill its basic food needs. Given that Eswatini is a relatively small country and its droughts also have high correlations with South African droughts, relying so heavily on imported food from South Africa can pose food security issues. The implication is that as droughts become more frequent regionally, their impact on the Eswatini economy could be severe, particularly on rural livelihoods who rely on substance agriculture (SEPARC, 2018). The EswatiniVulnerability Assessment Report in July of 2016 indicated that more than half of the population in the country (638,251 people) required livelihood support, mainly in the form of food aid due to the El Niño drought. Hence, to adequately prepare Eswatini for future droughts, the implementation of the DRM policy could focus on strengthening water harvesting and storage infrastructure to increase food crop production under irrigation, during times of drought (GoKS, 2007). Investments in water storage could be viewed as a type of food security insurance in the Eswatini context.

In Eswatini water is a lubricant of the economy and droughts disrupt economic activities and sever lifelines for many rural communities in the country whose livelihoods depend on rainfed agriculture. The El Niño drought of 2016 became an added pressure on limited government

4resources exacerbating endemic challenges in the country, such as food insecurity and poverty (FAO, 2018). As a result of the 2016 El Niño event, the Government of Eswatini and international development partners had no option but to reroute resources intended to fund implementation of development projects to help mitigate the impacts of the drought. The National Emergency Response, Mitigation and Adaptation Plan (NERMAP) raised 41% (US$39.1 million) of the required US$96 million for food and infrastructure such as dams for potable water. A total of 413,553 people benefited from NERMAP against an initial targeted need of 350,000. Of these beneficiaries, 323,874 received direct food aid while 89,679 received cash stipends for food. A total of 369,414 people benefited through NERMAP on potable water provision, sanitation services, and hygiene promotion services (SEPARC, 2018).

Impact of drought on agriculture

The literature on drought is deep on the effects of the negative effects (food security and economic wellbeing) via agricultural production. Desai et al. (1979) argued that droughts lead to unstable agricultural incomes against rising food prices, which in turn intensify the incidence of poverty and vulnerability of the poor. Though impacts of drought can generally be anticipated on agriculture, the reality is that each new drought presents a set of unique impacts on the eSwatini economy. These effects can manifest themselves at the household level in different venues, all of which end in increased food insecurity. Equally, the capacity of households and the economy at large to absorb, ease, or respond to drought impacts depends on the prior socioeconomic conditions of households and the existing disaster risk management structures and policies enabled in the country (GoKS, 2007). The socioeconomic assessment of drought is especially important for the agriculture sector because the NDS views agriculture as the economic engine that can lift a substantial number of people out of poverty in Eswatini. Investments in the